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Firm China steel prices see Baltic Dry rise 15%, shipping stocks surge

Tokyo: The Baltic Dry Index is roaring back hot on the firming prices for Chinese steel.
Mitsui O.S.K. Lines Ltd., operator of Japan's largest fleet of iron-ore ships, advanced in Tokyo trading this morning, along with other bulk shipping lines in Asia, after the Baltic index of prices for shipping commodities rose the most since 1985.
The shipping line gained as much as 6.3 percent to 645 yen and traded at 637 yen as of 9:52 a.m. on the Tokyo Stock Exchange. Nippon Yusen K.K., Japan's largest shipping line by sales, added as much as 5.9 percent. Kawasaki Kisen Kaisha Ltd., the third-largest, rose as much as 9.3 percent.
The Baltic Dry Index rose 15 percent yesterday in London as the number of idled capesizes fell to almost zero, indicating strengthening demand for iron ore. As much as a quarter of the world capesize fleet was probably idled two months ago as charter rates fell to a record low amid factory closures in China.
Hanjin Shipping Co., South Korea's largest sea-cargo carrier, gained as much as 8.5 percent to 23,550 won in Seoul. Hyundai Merchant Marine Co., South Korea's second-largest shipping line, advanced as much as 8.6 percent.
According to data from the Baltic Exchange, the average daily timecharter for capesizes stood at $21,810, up by $3,204 from Tuesday, while the relative earnings for panamaxes are now over $8,000 for supramaxes at $7,121 and for handies at $5,181. In its weekly report on the market and especially on capesizes, Fearnley's said that "after a slow awakening of the market after Chinese New Year, the market has gathered considerable momentum, with the Brazil / China rate moving from $15.00 level up to a reported $19.25, equating to over usd 36,000 for an index type vessel. Also the Pacific market has started to move as a reaction to the front haul market which now again has become a viable alternative for early vessels open in the Far East. The rates for West Australia have, as a result jumped from a steady mid $5.00 level to over $7.00. The transatlantic market is also firm, but due to high steam coal stockpiles on the Continent, there has been little activity"
Citing much firmer China steel prices New York financier Dahlman Rose commented: "The activity in the steel markets in China has spurred a more positive sentiment for dry bulk, and FFAs are firming significantly across all forward periods. Capesize rates are now at a four-month high near $22,000/day. Based on current steel prices, we believe steel margins are wide enough to see Capesize rates in the $25,000/day to $30,000/day range shortly. [05/02/09]

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